Finance:Sale of Goods Act 1979

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Short description: United Kingdom legislation
Sale of Goods Act 1979
Act of Parliament
Long titleAn Act to consolidate the law relating to the sale of goods.
Citation1979 c. 54
Territorial extentUnited Kingdom
Dates
Royal assent6 December 1979
Commencement1 January 1980[1]
Status: Amended
Text of the Sale of Goods Act 1979 as in force today (including any amendments) within the United Kingdom, from legislation.gov.uk.

The Sale of Goods Act 1979 (c. 54) is an Act of the Parliament of the United Kingdom which regulated English contract law and UK commercial law in respect of goods that are sold and bought. The Act consolidated the original Sale of Goods Act 1893 and subsequent legislation, which in turn had codified and consolidated the law. Since 1979, there have been numerous minor statutory amendments and additions to the 1979 act. It was replaced for some aspects of consumer contracts from 1 October 2015 by the Consumer Rights Act 2015 (c 15) but remains the primary legislation underpinning business-to-business transactions involving selling or buying goods.

The act applies to contracts where property in 'goods' is transferred or agreed to be transferred for a monetary consideration,[2] in other words: where property (ownership) in personal chattels is sold.

Part I

Part I (section 1) states that the act applies to contracts of sale of goods made on or after 1 January 1894. This was the date when the Sale of Goods Act 1893 took effect.

Part II, contract formation

Contract law
ContractLaw.jpg
Part of the common law series
Contract formation
Defenses against formation
Contract interpretation
Excuses for non-performance
Rights of third parties
Breach of contract
Remedies
Quasi-contractual obligations
Related areas of law
Other common law areas

Sections 2 to 15B concern how a contract of sale is formed and, in particular, contain standardised implied terms in all contracts of sale.

Section 2 specifies that a contract of sale involves the transfer, or an agreement to transfer, the property in goods from the seller to the buyer, in exchange for a money consideration, called the price.

Section 3(2) provides that if goods are sold and delivered to minors,[3] or those mentally incapacitated,[4] the minor will be liable to pay a reasonable price if the goods are necessaries. Necessaries are goods suitable to the persons' condition of life and actual requirements at the time of contracting. Under sections 6 and 7, concerning specific goods that perish, a contract is void where they perish before and avoided where they perish after contract formation.[5] (See Mistake (contract law)). Under section 8(2) the price is a money consideration given in exchange for property in goods. If the price, or means to ascertain a price, is not agreed, the buyer will be required to pay a reasonable price.[6]

Breach of these terms by the seller may give rise to an action for damages, and in the case of those terms which are also conditions, termination of the contract. Where the slightness of the breach renders it unreasonable for a non-consumer buyer to reject the goods, for breach of the implied terms as to description, quality or fitness or sample, then the buyer can only claim damages for a breach of warranty.[7] This amendment moderates the traditionally strict approach of English Law to contractual breach in a commercial context. Similarly, the right to reject goods can be lost, and only a breach of warranty asserted, if the buyer "accepts" the goods (Section 11(4)). Acceptance will have occurred if the buyer states that they accept the goods, uses them in a manner inconsistent with the seller's continued ownership, or allows a "reasonable time" to pass without rejecting them (Section 35(1) and (4)).[8] The right to reject may be modified or excluded by agreement between the buyer and seller, so long as the contractual wording makes clear that this is the case. The case of Aston FFI (Suisse) SA v Louis Dreyfus Commodities Suisse SA, using GAFTA terms and conditions, is an example of a case where the High Court has found that such a "stipulation in clear terms" was lacking.[9]

Section 12 incorporates into the contract a term that the seller either has legal title to the property to be sold or that he will have title at the time when property is to pass.

Section 13(1) provides that where the buyer is sold goods by description, the goods must correspond with this description. Harlingdon v Christopher Hull[10] held that this implied term may only be breached if the buyer relied upon the description. Therefore, if the buyer is an expert, reliance may not be established.

Section 14 states that terms are implicitly about quality and title and are only relevant where the seller is acting in the course of a business. There is no requirement as to the status of the buyer. The phrase "in the course of a business" has received much judicial consideration. Some judges have applied definitions found in other acts, but the case of Stevenson v Rogers[11] gives a wide definition to this requirement. It will encompass activity which is ancillary or loosely related to the business of a company. To use Richards'[12] example, a bank that sells a company car will be acting in the course of a business.

Satisfactory quality, s 14(2)[13]
The quality of the goods sold must be satisfactory (prior to 1994, this provision required 'merchantable' quality; this requirement has been retained in most Commonwealth versions of the Act). The Act provides an objective test to determine satisfactory quality; the standard that a reasonable person would regard as satisfactory, taking into account the price, description and any other relevant factors.[14] The courts have identified certain factors that may raise or lower the expectation of satisfaction. Second hand goods, per Bernstein v. Pamson Motors Ltd.,[15] will attract a lower expectation. On the other hand, goods of a reputable brand may attract a higher expectation, the judge in Bernstien used the example of a small ping on a Rolls-Royce being unsatisfactory. 'Other relevant factors' may include advertising in the case of consumer contracts.[16]
Fitness for purpose, s14(3)
If the buyer expressly or implicitly makes his purpose for the goods known to the seller, the seller is obliged to make sure the goods provided are fit for that purpose, if it is reasonable for the buyer to rely on the seller's expertise. An example of the application of this provision can be found in Godley v Perry.[17]

Under section 15, when goods are bought by bulk and the buyer has tested or examined a small number of those goods, the seller is obliged to make sure that every item in the bulk corresponds with the quality of the sample tested or examined.[18]

Section 15A refers to a buyer's general right to reject goods for failure to match the description or to meet the implied conditions about quality or fitness in sections 13–15.

Part III, effects of the contract

Sections 16 to 26 concern a contract's effects, and in particular the transfer of property and title. Under section 16, property (ownership) cannot pass unless the goods are ascertained (the actual goods to be sold are identified).[19] Section 18 provides presumptions to determine when property will pass, both for specific goods (ascertained at the time of the contract) and goods unascertained at the time of contracting. These 'rules' can be excluded by contrary implication or express agreement.

Rule 1: in an unconditional contract for sale and delivery of specific goods in a deliverable state, property passes immediately on contract formation.
Rule 2: where the seller is bound to perform some condition before the sale is possible, property passes when this condition is performed.
Rule 3: where the seller is bound to measure or weigh the goods to ascertain the price, property passes when this is done and the buyer is notified.
Rule 4: when goods are delivered on sale or return, or on approval, property passes when the buyer adopts the transaction (or fails to give notice of rejection within a reasonable time).
Rule 5: in a sale of unascertained goods, the property will pass following an unconditional appropriation of goods or, where the sale is from a specified bulk, following ascertainment by exhaustion (i.e. removal of all the goods in the bulk but those destined for the buyer).
Seller does not have title
if the seller does not own the goods, the buyer generally cannot gain title, but he can sue for breach of the implied term as to title.[20] This is subject to numerous exceptions in closely defined circumstances, for example: s.2 Factors Act 1889, ss. 21, 24, 25 SGA 1979.
Seller has voidable title
where the seller holds voidable title, title can pass to a buyer in good faith. If title is voided before the contract of sale is concluded, title cannot pass.[21]

Part IV, contract performance

Part IV, sections 27 to 39, concerns "performance of the contract".

Under section 29, concerning the place of transfer, where location is not stipulated, the buyer must collect the goods at the seller's place of business, if there is one.[22] The seller must be prepared to deliver them to the entrance of his place of business.[citation needed] If the contract was concluded by a means of communication at a distance and the buyer is a consumer, this provision is disapplied and the Consumer Protection (Distance Selling) Regulations 2000 apply instead. However, it is changed today and what applies is The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013.

Section 35 concerns the buyer's acceptance (see J & H Ritchie Ltd v Lloyd Ltd [2007] UKHL 9).

Section 35A concerns a buyer's right of partial rejection and partial acceptance.

Part V, rights of unpaid seller

Within six months, beginning at the time at which the goods were delivered, the buyer can require the seller to repair the goods, reduce the price, or rescind (revesting property and requiring the return of any payment) the contract where the buyer successfully claims that the goods were not in accordance with the contract at the time of delivery.[23] The seller can defeat this claim if (a) "it is established that the goods did so conform" at the time of delivery, or (b) the measure is "incompatible with the nature of the goods or the nature of the lack of conformity.[24]

Consumer requires repair or replacement
The seller must repair or replace the goods within a reasonable amount of time, incurring all costs necessary to perform this task.[25] This cannot be required if it is impossible or disproportionate in consideration of other available remedies.[26]
Consumer requires reduction or rescission
This is only available where repair or replacement is impossible or the seller is taking an unreasonable amount of time to perform these requirements. Any reimbursement must take into account any use that the buyer has had out of the goods.[27]

Part VI, actions for breach of contract

Sections 49 to 54 concern actions for breach of contract.

Sections 49 and 50 protect sellers' rights.

Sections 51 to 53 (and 53A in Scotland) relate to damages due to a buyer for non-delivery of goods, where the seller "wrongfully neglects or refuses to deliver the goods to the buyer", although consumers' rights in this regard are now covered by the Consumer Rights Act. Damages are generally to be estimated according to the "loss directly and naturally resulting, in the ordinary course of events, from the seller’s breach of contract", but where there is "an available market", damages should be calculated prima facie as the difference between the agreed contract price and the "market or current price" facing the buyer needing to secure an alternative supply. The Court of Appeal dealt with a case in 2016 (Hughes v Pengragon Sabre Ltd.) where Pendragon had failed to supply Hughes with a "limited-edition" Porsche car, for which there was no "available market". The ruling calculated damages based on the cost to purchase "the nearest equivalent" car.[28]

Section 52 directs that the court may order specific performance where appropriate if the buyer has applied for this. Such an order would deny the seller the option to "retain the goods on payment of damages". Section 53 concerns remedies for a breach of warranty.

Section 54 concerns interest payments.

Part VII, supplementary

Terms from the Sale of Goods Act will not be incorporated into the contract where they have been expressly excluded, or express terms conflict with them.[29] These exclusions may be invalid under common law, the Unfair Contract Terms Act 1977, or in consumer cases the Unfair Terms in Consumer Contracts Regulations 1999. If the term excluding these implied terms is struck out, the implied term will be effective.

Under the Unfair Contract Terms Act 1977, section 12 may never be excluded, and sections 13 to 15 may never be excluded where the buyer is a consumer.[30]

Future prospects

The 1979 Act was preceded by the UK's original Sale of Goods Act of 1893, a statute drafted by Sir Mackenzie Chalmers. The success of both the 1893 and 1979 statutes was largely down to their conciseness and to Sir Mackenzie's clarity of expression. In the 1990s, a number of short statutes were passed to amend the 1979 Act, and a new updated and consolidated Act is considered to be overdue.[by whom?]

See also

Notes

  1. ↑ The Sale of Goods Act 1979, section 64(2)
  2. ↑ Sale of Goods Act 1979 s2(1).
  3. ↑ Under Scots law this aspect is now regulated by the Age of Legal Capacity (Scotland) Act 1991
  4. ↑ In England and Wales this aspect is now regulated under the Mental Capacity Act 2005.
  5. ↑ s6, 7.
  6. ↑ s8(2).
  7. ↑ s15A, as added by the Sale of Goods Act 1994 s4(1).
  8. ↑ Crescent Purchasing Limited, Acceptance of the goods or services, FELP Library, accessed 21 January 2024
  9. ↑ England and Wales High Court (Commercial Court), Aston FFI (Suisse) SA v Louis Dreyfus Commodities Suisse SA, EWHC 80 (Comm), paragraph 31, handed down 23 January 2015, accessed 21 January 2024
  10. ↑ Harlingdon & Leinster Enterprises Ltd v Christopher Hull Fine Art Ltd [1990] 1 All ER 737
  11. ↑ [1999] 1 All ER 613, distinguished from R & B Customs Brokers & Co. v. United Dominions Trust [1988] 3 All ER 831; and affirmed by Feldaroll Foundry plc v. Hermes Leasing Ltd. [2004] EWCA Civ 747.
  12. ↑ P Richards, Law of Contract, (7th Eden, London, Pearsons 2006) 124
  13. ↑ As substituted by the Sale of Goods Act 1994 s 1.
  14. ↑ s 14(2A), as added by the Sale of Goods Act 1994 s 1.
  15. ↑ [1987] 2 All ER 220.
  16. ↑ s 14(2D), as added by the Sale and Supply of Goods to Consumers Regulations 2002, reg 3(2).
  17. ↑ [1960] 1 WLR 9.
  18. ↑ s 15
  19. ↑ s16.
  20. ↑ s21.
  21. ↑ s23. see Shogun Finance Ltd v Hudson [2004] 1 AC 919. For legal justification see Brooks, O & Dodd, A, "Shogun: A Principled Decision" (2003) 153 NLJ 1898
  22. ↑ s29(2).
  23. ↑ s 48B, as added by the Sale and Supply of Goods to Consumers Regulations 2002.
  24. ↑ s 48A(4), as added by the Sale and Supply of Goods to Consumers Regulations 2002.
  25. ↑ s 48B(2), as added by the Sale and Supply of Goods to Consumers Regulations 2002.
  26. ↑ s 48B(3), as added by the Sale and Supply of Goods to Consumers Regulations 2002.
  27. ↑ s 48C, as added by the Sale and Supply of Goods to Consumers Regulations 2002.
  28. ↑ Warner Goodman, Certainty in Contracts - Hughes v Pendragon [2016], published 19 July 2016, accessed 11 January 2023
  29. ↑ s 55
  30. ↑ Under Scots law, this applies where there is a consumer contract.

References

  • PS Atiyah, J Adams and H MacQueen, Atiyah's Sale of Goods (12th edn Longman)
  • R Goode and E McKendrick, Goode on Commercial Law (4th edn Penguin)
  • L Sealy and RJA Hooley, Commercial Law: Texts, Cases and Materials (

External links



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